The American Jobs Act

Details & Argument

The American Jobs Act sent to Congress by President Obama, is a collection of tax breaks and direct spending measures, costing about $450 billion, designed to stoke job creation.

Senate Democratic leaders proposed a surtax on people earning more than $1 million a year to cover the legislation's cost. Elements include:

Direct Job Creation Actions

$85 billion would be targeted to state and local governments, the bulk of which would be targeted to keeping teachers on the job and modernizing schools.

Aid authorized in the bill would prevent up to 280,000 teacher layoffs as well as the layoffs of thousands of police officers and firefighters, according to the White House. Funds would also be available for modernizing at least 35,000 public schools across the country, which would result in thousands of people being employed building new science labs, setting up Internet-ready classrooms and renovating schools in both rural and urban communities.

Funds would also be made available for immediate investments in infrastructure, modernizing roads, railways and airports, employing hundreds of thousands of workers. More jobs would be created rehabilitating homes and businesses and stabilizing communities ravaged by foreclosures. This aspect of the program would leverage private capital and scale up successful models of public-private collaboration.

Aid for the Unemployed

The American Jobs Act would extend long-term jobless benefits so that 5 million Americans looking for work will not lose their benefits. It also includes provisions intended to prevent layoffs and give states greater flexibility to use unemployment insurance funds to connect job-seekers to work. The legislation would encourage work-sharing arrangements as an alternative to layoffs, improve reemployment services for the long-term unemployed through counseling and eligibility assessments, create a "Bridge to Work program in which displaced workers take temporary, voluntary jobs or pursue on-the-job training, and establish innovative entrepreneurship and wage insurance programs that will allow states to be empowered to implement wage insurance to help reemploy older workers and create programs that make it easier for unemployed workers to start their own businesses.

The legislation would give a $4,000 tax credit to employers for hiring long-term unemployed workers and would prohibit employers from discriminating against unemployed workers when hiring.

The legislation includes support for summer jobs and sector-based training programs for low-income youth and adults.

Tax Cuts

The legislation would cut in half the taxes paid by businesses on their first $5 million in payroll, providing a tax but targeting the benefit to the 98 percent of firms that have payroll below this threshold. Payroll taxes would be completely eliminated for firms that increase their payroll by adding new workers or increasing the wages of their current workers. (To ensure that this tax cut is focused on small businesses, the tax relief is capped at $50 million in payroll increases.)

Employees would also receive a payroll tax cut under the bill; it would increase the payroll tax cut passed last year to a 50 percent reduction in 2012, which would amount to a $1,500 tax cut for the typical American family.

Employer and employee payroll taxes are paid into the Social Security trust fund. General fund revenues would be used to offset the decreased revenues flowing into the trust funds as a result of the tax cuts.

A separate tax credit would be available to businesses that hire veterans who have been unemployed for six months or longer; that credit would be larger for the hiring of veterans who have service-connected disabilities.

Another provision in the legislation would enable homeowners to refinance their mortgages at todays near 4 percent interest rates, which can put more than $2,000 a year in a family's pocket.

The legislation would extend 100% business expensing into 2012, which the White House believes would stimulate business investment by putting an additional $85 billion in the hands of businesses next year. Small Business Administration-backed loan limits would also be increased under the legislation.

A cloture motion to end a Republican-led filibuster against the bill failed on a vote of 50-49. Sixty votes were required for passage. Forty-eight Democrats and two independents caucusing with the Democrats supported cloture; three Democrats joined 47 Republicans in opposition. (As is customary, Senate Majority Leader Harry Reid switched his vote to "no" in a procedural maneuver that gives him the ability to bring the legislation back to the floor at a later date.)